Automating HR may no longer be a luxury but a must-have

With six months to go before 2014, I thought I’d share a story about technology, human resources and the Patient Protection and Affordable Care Act.

Last year, businesses across the country learned that one of the law’s provisions required companies that distributed more than 250 W-2s to determine the total cost of health care coverage for each employee covered on the group health plan and report the sum on the federal W-2 form issued in January 2013.

One firm in Rochester began looking for an easy way to gather the information. Payroll was not an option because that system tracked only the employee’s contribution, and the new requirement asked for both the employee’s and employer’s contributions. With no other technology options to help, the company ended up using spreadsheets to track costs for each employee. Once that was done, the data had to be keyed into payroll by hand to be reported on each individual W-2 form. The process ate up hours and hours of valuable time.

In 2014, all businesses, regardless of the number of W-2s distributed, will be subject to this requirement for 2013 health care costs. Before constructing spreadsheets, it might be a good time to ask: Is there a better way?

If you’ve been putting off the idea of investing in technology to automate the administrative and transactional work in your human resources department, it’s time to revisit the question. HR functions can be divided into three broad areas: transactional, employee services and HR strategy. Many people argue that HR’s greatest potential impact on an organization is at a strategic level, but today’s typical HR model doesn’t support this idea.

Even without complicating factors like health care reform, transactional work today can take up to 65 percent of HR’s time. Employee services, another important area, may consume 30 percent more, leaving less than 10 percent devoted to strategy. A client recently summed it up this way: “HR administrative work has to be done, and it has to be done right, but the investment in time and resources offers no return to an organization.”

And as the story I just shared illustrates, this situation could worsen as new health care requirements take effect next year.

Enter technology
Thankfully, many technology options today can help even the smallest organizations automate, document, standardize and improve HR management.

A growing trend in the market is to use one, integrated software solution to automate and manage HR, payroll, benefits, performance, recruiting and compliance. Today’s Human Resource Information Systems typically include three components: payroll, HR and benefits, with optional employee and manager self-service modules. Because these systems are Internet-based, they are especially attractive to smaller and midsize businesses, since they do not require a large capital outlay or an internal information technology department to install and continually update software.

Integration means the different HR components can talk to each other, making it possible to more easily access data (for the health care reform provision, for example). Some ways in which this technology can be helpful:

HR systems also can be linked to benefit carriers, eliminating the need to manually enter employee changes while reducing additional paperwork and cost. For a better understanding of what automation means in terms of savings, consider this:

Industry studies report that it costs roughly $109.48 to manually enroll an employee in a benefits program. When an employee enrolls online, the cost drops to $21.79, an 80 percent saving. On average, employee “self-service” reduces HR cost by $9 per employee per month. And with a more tech-savvy workforce, many employees have come to expect 24/7 access to benefits administration anyway.

These are just some of the reasons why many companies today are moving toward the HRIS model. In August, a Towers Watson survey of 628 companies found that 24 percent had implemented new HR information systems in the previous 18 months. And industry reports indicate that among U.S. companies, 22 percent are implementing a new primary HR system or planning to do so.

It’s important to note that HRIS is not the only option. Recognizing that no one solution can be the best for everything, some companies buy systems that are more tailored to a specific need (applicant tracking or orientation of new employees, for example). There are many different ways to automate different aspects of the HR function, but it’s important to remember that different systems don’t automatically talk to one another, so someone has to make all the pieces work together.

Technology equals opportunity
I recently read that combining the lat-est HR technology with the same tired HR philosophy is a lot like “putting lipstick on an old pig.”

While it made me laugh, the phrase emphasizes the power of technology to flip the typical resource-consuming HR model on its head. Data analytics is a technological evolution that will make it easier for HR to play a more strategic role. Reporter Steve Lohr pointed to this change in a New York Times article last month, writing that “today, every email, instant message, phone call, line of written code and mouse-click leaves a digital signal. These patterns can now be inexpensively collected and mined for insights into how people work and communicate, potentially opening doors to more efficiency and innovation within companies.”

Advocates, according to Workforce Management magazine, believe insights gained from analyzing data can lead to more efficiency, helping the HR function become more strategic. Number crunching, for example, can help with selecting job candidates, keeping valued employees from leaving, grooming the right people for promotion and planning to meet future workforce needs.

Finding the right fit
Data analytics puts HR departments in a better position to contribute to an organization’s bottom line by improving business performance. Pushing the strategic value of HR to the forefront may make it easier to convince senior management that an updated HR management system is a worthy investment. To justify the investment, it will be important to identify the system that best fits the needs of the organization and then communicate both tangible cost savings and intangible process improvements. In other words, it will be very important to calculate the return on investment.

Here are some ideas for finding the right system:

•Identify system requirements.
•Consider “nice to haves.”
•Research vendors based on your size and needs.
•Research system functionality and Tier 1 support.
•Customize the selection process. Don’t use a generic request for proposals.
•Develop a list of key tasks and reports that each vendor must demonstrate.
•Ask about each company’s data security protocol.
•Check vendor references.
•Explore the system and other considerations such as implementation, support and ongoing development.

With major changes to employee benefits and reporting requirements on the horizon, an HR system is an investment that pays multiple dividends. Human resources and benefits teams gain efficiencies, management can access critical data, and employees have 24/7 access to their benefits and payroll information.

Candace Walters is president of HR Works Inc., a human resource consulting and outsourcing firm providing on-site HR management, affirmative action plans, HRIS self-service technology, benefits administration, training and employee handbooks to clients throughout the U.S. To offer comments on this column or ideas for future columns, write walters@hrworks-inc.com.